Study: ‘No Pay, No Play’ Cuts Insurance Costs, Uninsured Rates

A recent study from the Insurance Research Council (IRC) shows that a state’s rate of uninsured drivers sees a modest reduction after “no pay, no play” laws go into effect.

In addition to standard penalties for driving without insurance like fines and fees, “no pay, no play” laws are intended to deter uninsured driving by restricting the compensation uninsured drivers can receive after an accident, even if they were not responsible for the crash.

These laws usually bar uninsured motorists from being able to collect compensation for “pain and suffering” or other types of noneconomic losses.

According to the IRC study, the uninsured motorist rate can fall as much as 1.6 percent after “no pay, no play” laws go into effect.

The study looked at states without such laws and estimated what the average insured motorist in those states had to pay an additional $4.69 in premiums in 2007 as a result of their insurers’ having to cover uninsured motorists’ noneconomic losses. That year, according to the study, insurers paid a total of $682.5 million to uninsured claimants in 39 states to compensate for noneconomic damages.

The states enforcing “no pay, no play laws” are Alaska, California, Iowa, Kansas, Louisiana, Michigan, New Jersey, North Dakota, Oklahoma and Oregon.

States Show Varying Degrees of Support for ‘No Pay, No Play’ Laws

Oklahoma is the latest state to enact a “no pay, no play” law; their version of the law went into effect in November 2011. The state still allows uninsured drivers to collect economic damages that include medical costs and loss of income but prohibits them from compensation related to pain and suffering.

According to 2009 data from the Insurance Research Council (IRC), nearly 1 in every 4 drivers lacked coverage in Oklahoma, putting the state high above the national average of 1 in every 7 drivers and giving the state the third-highest uninsured motorist rate in the U.S.

John Lucido, state executive director for Farmers Insurance, said in a statement at the time that the new law would help “stabilize” coverage rates.

Also in 2011, Montana lawmakers pursued establishing “no pay, no play” in the state with SB 111, which ultimately failed with the governor’s veto in April.

Gov. Brian Schweitzer said in his veto message that he did not see a “rational relationship between the ‘punishment’ under the bill and the status of the individuals upon whom the punishment would be imposed.”

The Property Casualty Insurers Association of America (PCI) supports “no pay, no play” legislation, calling SB 111 a “common sense” measure for Montana before it was vetoed.

“Uninsured drivers should not be allowed to benefit from someone else’s compliance with the law while simultaneously denying that benefit to someone they injure in an accident,” PCI said in a statement.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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